Editorial: SVMH, lawyers fail the smell test

If the leaders of Salinas Valley Memorial Healthcare System hope to ever regain the trust of the community, a crucial first step is to stop listening to their lawyers.

A state audit report this week spanked the hospital and its board of directors for lavishly compensating key administrators, for quietly creating a pension system that let former CEO Sam Downing walk away with a ridiculous $5 million payout, for breaking state public meetings laws and for otherwise acting as though they were running a country club rather than a taxpayer-supported hospital.

But the key finding was that the directors and Downing had engaged in contractual, donation and investment practices that raised serious conflict of interest questions, some so serious that the state Auditor's Office has asked the Monterey County District Attorney's Office to explore the possibility of criminal charges.

In most instances, we suspect the DA's Office won't find anything to prosecute over. For one thing, the DA's Office has shown little interest in pressing cases against powerful interests. And for another, most of the conflicts cited in the 82-page report stop short of constitituting criminal behavior.

California lawmakers, having no interest in laws that would cramp their own styles, have crafted conflict of interest rules that allow California elected and appointed officials to show considerable favoritism to friends, relatives and business associates as long as there is no direct flow of money back to the officials.

For the most part, the codes say that public officials can be prosecuted in connection with contracts or the like only if their actions provided them with direct financial benefit. If hospital director A votes to give a contract to his brother-in-law, despite a lower bid from a better vendor, the law says it's OK unless the brother-in-law slips some of the resulting cash to the director.

That's where the hospital lawyers come in. Based on the auditor's report, and the SVMH board's reaction to it, it appears the hospital lawyers have advised time and again that it was OK for the directors to approve cozy contracts, deposit hospital money in a director's bank and contribute to a director's favorite charity as long as the decision didn't put actual cash in the director's pocket.

Never mind that the public would find many of those decisions to be unacceptable, unethical and unsupportable.

Unlike California's weak conflict laws, the public doesn't approve of official decisions that provide political or indirect benefits to the officeholders. You scratch my back and I'll scratch yours is a way of life in politics, particularly small-town politics involving lifelong acquaintances, but it's a big part of the reason for the public's disdain.

Instead of asking the lawyers to bless slippery deals, the hospital directors and others in power should ask their friends, neighbors, ministers and mentors for advice. Conflicts or even remotely possible conflicts should be declared early and loudly and the deciding factor should be the smell test, not the legal test.